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Tax Relief and Financial Recovery for Los Angeles County Following Wildfire Disaster

The devastating wildfires in Los Angeles County have prompted President Biden to declare the region a federal disaster area, bringing much-needed tax relief and financial recovery options to those affected. Here’s an overview of the critical tax provisions and relief measures now in effect.

Federal Disaster Declaration and Impact

Los Angeles County has been designated FEMA disaster DR-4856-CA, with an incident period starting January 7, 2025, and continuing. This declaration activates federal tax relief provisions under the Internal Revenue Code, enabling recovery support for residents and businesses.

Key Tax Deadline Extensions

For those living in the disaster area, the IRS has postponed most tax-related deadlines falling between January 7, 2025, and October 15, 2025, to October 15, 2025. These include:

  • 2024 Tax Filings: Forms 1040, 1120, and 1065, among others.

  • Estimated Tax Payments: For January 15, April 15, June 16, and September 15, 2025.

  • Quarterly Payroll and Excise Returns: Due January 31, April 30, and July 31, 2025.

Note: Payroll and employment tax deposits are not postponed, but penalties for deposits due January 7–22, 2025, will be waived if paid by January 22, 2025.

Relief applies broadly, even to taxpayers outside the disaster area if their records or tax professionals are located in the affected region.

Casualty Loss Provisions

Taxpayers can claim losses from uninsured or unreimbursed damage due to the fires on their federal returns for either 2024 or 2025. The Federal Disaster Tax Relief Act of 2023 reduces the threshold for claiming personal casualty losses to $500 and allows these losses to increase the standard deduction.

Accessing Retirement Funds

Taxpayers facing economic hardship due to the disaster may withdraw up to $22,000 from retirement accounts as a qualified disaster recovery distribution:

  • No Early Withdrawal Penalty: The 10% penalty is waived.

  • Taxable Income Spread: Income from the distribution is spread over three years unless otherwise elected.

  • Repayment Option: Funds can be repaid within three years.

Distributions must be made by July 7, 2025, to qualify.

Additional Relief Programs

  • Qualified Wildfire Relief Payments: Tax-free grants for fire-related expenses (e.g., housing, repairs) received by December 31, 2025.

  • Qualified Disaster Relief Payments (§139): Excludes from income payments for personal or household needs directly tied to the disaster.

Involuntary Conversions (§1033)

If property is destroyed or damaged, gains from insurance reimbursements can be deferred by reinvesting in similar property within four years. Insurance proceeds for unscheduled personal items are excluded from income.

How to Proceed

Los Angeles County residents should carefully document all disaster-related expenses and damages. Taxpayers seeking deadline relief or claiming casualty losses should consult a tax professional for guidance.

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